Environmental lawyer in $19 billion Amazon judgment faces RICO trial

Two years ago, Ecuador’s courts found Chevron was liable for a record $19 billion for the pollution left behind by its predecessor. Now, the oil company is fighting back, saying lawyers engaged in fraud to win the judgment.

The oil giant claims that Steven Donziger, a lawyer for the Ecuadorean plaintiffs, engaged in racketeering by manufacturing evidence and bribing judges in the Andean nation to win the record-setting verdict.

Donziger and his legal team say Chevron is trying to evade its responsibility. Since it couldn’t win the pollution trial on its merits, they say, it’s going after the lawyers.

The case has dragged on — in one form or another — for 20 years, has produced more than 200,000 pages of evidence, spawned documentaries and television programs, and dragged celebrities and politicians into its wake. Movie star Daryl Hannah has dipped her hands into oily muck for the cameras, and Ecuadorean President Rafael Correa has called the case a matter of national honor and asked for a Chevron boycott.

Both sides have accused their rivals of lying and cheating to make their case. But this time, it’s the Ecuadorean team that’s on the defensive.

At the New York bench trial, Chevron is expected to present a raft of sworn testimony it says proves Donziger gamed the Ecuadorean courts.

Among that evidence: testimony from Stratus Consulting, a Colorado-based environmental engineering firm hired by Donziger’s team. In a March deposition, Stratus Executive Vice President Douglas Beltman said his company wrote the damning environmental report that was passed off as being the work of Richard Cabrera, the “independent expert” appointed by the Ecuadorean judges. To give that study more credence, Stratus then provided third-party commentary supporting the document’s claims.

In the testimony, Beltman says he was following Donziger’s instructions when he lied about the origins of the report to journalists, the lawsuits’ financial backers and U.S. Rep. Jim McGovern, who visited the country on a fact-finding trip. He also said he could no longer stand behind the study’s findings, or his commentary, because of Donziger’s influence. Beltman said he was instructed not to make a distinction between oil contamination that could be attributed to Chevron’s predecessor, Texaco subsidiary TexPet, and its majority partner, state-run Petroecuador. He also said Donziger asked him to inflate the cost of repairing the damage.

Donziger’s team says the issue is moot. In his Feb. 14, 2011 ruling, Ecuadorean Judge Nicolás Zambrano threw out the tainted Cabrera report. Even so, he said there was sufficient evidence to find Chevron liable. He ordered the company to pay $8.6 billion plus 10 percent to an environmental non-profit. When Chevron refused to apologize within 15 days, the fine was doubled.

Donziger said Chevron’s true aim behind this case is to strong-arm his supporters.

“Chevron [is using] the case for publicity purposes to try to intimidate people into not working for us,” Donziger said. “When you allege RICO or racketeering violations, it’s a very explosive charge that almost can paralyze or terrorize people into not wanting to help the Ecuadoreans.”

But Chevron’s claims run deeper. The company may also present testimony by Alberto Guerra a former judge who says he was paid $1,000 a month by Donziger’s team to ghost-write Zambrano’s original judgment.

“Litigants sometimes secretly provided Judge Zambrano and Mr. Guerra with draft judgments, which Mr. Guerra would revise and Judge Zambrano would issue as his own,” Chevron’s lawyers wrote to Ecuador’s Prosecutor General in September. “This ghost writing took place at both the trial and on the appellate ‘second instance’ review.”

Donziger’s lawyers say Guerra is an unreliable witness and on the oil company’s payroll. While Chevron admits it helped Guerra move to the United States for “his own safety” it said there is ample evidence, including bank transactions, that prove his claims.

The case dates back to 1993, when Ecuadorean villagers sued Chevron’s predecessor, Texaco, in New York on claims that it poisoned the Amazon from the 1960s to 1992 with shoddy environmental practices that included pumping millions of gallons of oil-tainted wastewater into creeks and streams. When Texaco left, it spent $40 million to clean up its portion of the drilling sites and, in 1998, the government signed off on the remediation and absolved the company of any further legal responsibilities.

But Ecuador’s courts found that the government release did not cover third-party claims. So when Chevron and Texaco merged in 2001, Chevron inherited the legal battle. In 2002, the case was moved to Ecuador at Chevron’s insistence.

By the time of Zambrano’s ruling two years ago, Chevron no longer had assets in the country so the plaintiffs have been seeking damages in Canada, Argentina and Brazil. They hope to take their case to Venezuela and other countries soon.

So far, Chevron has been able to parry those attacks. Last month, an international arbitration court in The Hague found that Ecuador had violated the U.S.-Ecuador Bilateral Investment Treaty by allowing the case to proceed in the first place. According to the court, Chevron was covered by the 1998 release.

Correa said the company’s shoddy practices had poisoned drinking water and led to cancer in the region.

“This is one of the largest environmental disasters in the world,” he said, after dipping his hand into an open pit of petroleum sludge, “and they want to get away with it.”

Chevron says the president is grand standing. Under the remediation plan of the 1990s, Texaco was never required to clean up Aguarico 4.

“It’s an attempt to distract public attention from the government’s own obligations to its people in the [Amazon] and to distract attention from the massive fraud that took place in our case,” Chevron spokesman James Craig said of Correa. “He’s in attack mode.”

Chevron is betting that with the arbitration decision and a RICO case under its belt, it can convince foreign courts not to make good on the Ecuadorean judgment.

But Donziger said foreign courts might not be impressed by the ruling of a single judge in New York.

If he loses, Donziger said, Chevron “will be waltzing around the world like they won this big case in New York and that’s all that matters.”

But foreign courts will “make rulings based on their own countries’ laws to determine whether or not to seize billions of dollars in Chevron assets,” he said. “Any order from a U.S. judge directing otherwise reeks of judicial imperialism and has a good chance of backfiring against Chevron.”